Professional versus Political Contexts: Institutional Mitigation and the Transaction Cost Heuristic in Information Systems Outsourcing
Authors: Miranda, Shaila M.; Kim, Yong-Mi
Journal: MIS Quarterly (2006)
DOI: 10.2307/25148747
IS research has considered the outsourcing decision from the perspective of transaction cost economics (TCE) and institutional theory. In this research, we consider how the appropriation of the logic of transaction cost economics is contingent on decision makers’ institutional context. The institutional contexts contrasted are professional versus political contexts. In a survey of 214 city governments in the United States, we substantiate the existence of these two institutional contexts, a distinction that has been noted to extend into the private sector as well. Subsequent analyses of the moderating effects of institutional context on the application of the TCE heuristic to the outsourcing decision revealed the following: The institutional context moderated the impacts of “human frailty” conditions—of opportunism and bounded rationality—and of transaction frequency on outsourcing decisions. In professional contexts, opportunism reduced outsourcing and frequency increased outsourcing; in political contexts, bounded rationality fostered outsourcing and frequency dissuaded outsourcing. However, no institutional moderation was noted for the situational conditions of asset specificit…